FR 2021-01451

The document issued by the Financial Crimes Enforcement Network (FinCEN) seeks public comment on a proposed renewal of existing regulations under the Bank Secrecy Act. This rule allows banks to designate certain customers as "exempt persons," which means that banks don't have to report cash transactions over $10,000 with those customers. The intention behind this rule is to reduce paperwork for banks and simplify account management processes. This initiative is part of FinCEN's continuing effort guided by the Paperwork Reduction Act of 1995, which aims to minimize the paperwork burden for businesses and individuals.

Summary of Issues and Concerns

The document itself is quite complex and includes a substantial amount of regulatory language that may be challenging for those without legal or financial expertise to fully understand. For readers, especially those who might be tasked with reviewing these regulations within banks or related institutions, these difficulties could lead to misunderstandings or misinterpretations about the requirements.

Moreover, the document doesn't clearly explain how the estimated costs and administrative burdens were calculated. This lack of clarity could lead financial institutions to question the validity of the estimated burdens and to feel uncertain about whether those estimates truly reflect the actual workload they expect to face.

Further complicating the issue is the potential administrative burden placed on financial institutions. The document outlines detailed procedural requirements that banks must follow to comply with the exemption designation, which could be perceived as excessive if the necessity or benefits of these processes aren't obvious.

Another point of concern is the public comment process itself. While FinCEN requests public input, there is little guidance on what specific feedback would be most useful. This ambiguity might result in comments that do not meaningfully contribute to the review process. Additionally, the document's many references to statutory provisions and prior regulations might not be understandable to all stakeholders, particularly those in smaller institutions without specialized legal teams.

Impact on the Public and Stakeholders

Generally, the public might benefit from the intended efficiency of these rules. As banks streamline their processes and focus on significant risks, costs might be kept stable or even reduced, potentially leading to better service for customers.

For financial institutions, particularly banks, the positive impact of this rule is the reduction of mandatory reporting requirements for certain large cash transactions, which could save time and resources that can be redirected to more pressing compliance issues. However, institutions could also face challenges due to the involved compliance documentation processes, which require diligent oversight and regular reviews.

Smaller banks and those without robust compliance departments might find the requirements to be onerous. They could struggle with the administrative load and costs associated with meeting the detailed procedural and documentation obligations outlined.

Overall, while the document aims to renew existing rules with the objective of efficiency, it simultaneously opens the door to legitimate concerns from banks about the practical implications of compliance, especially without clearly defined estimates or guidelines for commenters. As a result, stakeholders may have reservations about the actual benefits versus the administrative burdens these regulations might impose.

The document primarily discusses the use of FinCEN Report 110 (Designation of Exempt Person Report, or DOEP Report) by banks to classify eligible customers as exempt from filing certain financial reports. Under the Bank Secrecy Act (BSA), banks are usually required to file a Currency Transaction Report (CTR) for transactions exceeding $10,000. However, when customers are designated as exempt, this requirement is waived.

The potential financial impact of these regulations is illustrated by calculations related to maintaining compliance. The document estimates the total annual cost associated with complying with these requirements to be $780,063. This amount considers the costs incurred by banks during the preparation, filing, maintaining electronic copies, and conducting regular reviews of the DOEP Reports. Specifically, the cost per hour for filing these reports is calculated at $48.00. The document outlines that the estimated traditional annual PRA burden is 18,141 hours.

Despite the extensive focus on compliance costs, one of the identified issues is the lack of clarity on how these costs and burdens were calculated. The estimates are based on previous data, which might not accurately reflect current industry conditions or regulatory changes. This leads to potential ambiguity, as stakeholders may not fully grasp the basis for these financial estimates without detailed explanations or updated data.

Additionally, the document requests input from the public on these financial burdens, yet it does not offer specific guidance on what information would be useful. This lack of direction could result in unfocused or inadequate responses, thereby hampering FinCEN's ability to accurately assess the actual costs financial institutions face. These challenges underscore the importance of clearer communication and transparency in regulatory documentation and the assessment of financial implications.

Overall, while the document attempts to outline the financial implications of the DOEP reporting requirements, the issues raised highlight the need for improved clarity and updated data to ensure that these estimates are both understandable and accurate.